Time to smoke out media Santas

The ACCC must take a tough line on recent moves by Rupert Murdoch and Kerry Stokes, write Allan Fels and Fred Brenchley JUDGING by Graeme Samuel’s remarks to a Senate committee, Rupert Murdoch’s 7.5 per cent share raid on competitor John Fairfax Holdings is exercising the mind of the Australian Competition and Consumer Commission chairman. So it should. Indeed, there is a strong case for the ACCC to take court action forcing News Corp to divest. The ACCC should also be taking a very long spoon to Kerry Stokes’s Seven Network’s 14.9 per cent stake in the West Australian. Of the four “positioning” moves so far as players stake claims in the new media landscape expected after parliament passed the Howard government’s new media laws abolishing foreign and cross-ownership restrictions, only James Packer’s 50 per cent sale to foreign equity and Tony O’Reilly’s proposal to buy out minorities in APN pose few competition issues. The Murdoch and Stokes moves raise serious competition concerns. News’s 7.5 per cent in Fairfax is widely seen as positioning Murdoch at the table as Fairfax is either sold or its valuable mastheads, including the Age, the Sydney Morning Herald and the Australian Financial Review, are carved up among players. News has become one of the largest Fairfax shareholders, ensuring Murdoch a strong say in the future ownership and perhaps running of the company. That is an extraordinary prospect. Between the Age, SMH and AFR, Fairfax is News’s sole competitor in the big Sydney, Melbourne and national newspaper markets. The possibility of Murdoch influencing the future ownership of a competitor has obvious trade practices concerns. Section 50 of the Trade Practices Act recognised future events when it empowered the ACCC to police share acquisitions that “have the effect, or be likely to have the effect, of substantially lessening competition in a market.” “Likely” is the operative word here. A substantial lessening of competition does not have to be something that has already occurred. The ACCC opposed Tabcorp’s proposed acquisition of Unitab partially on the grounds that it would lessen competition in wagering markets. Sleight of hand has featured in the media asset game in the past. News Corp has form when it comes to directing future control and ownership of competitors. In 1989, it provided Kerry Stokes with a loan to buy the Canberra Times from Kerry Packer - with an option to later buy the newspaper itself. There is also an element of gamesmanship in News’s carefully selected 7.5 per cent figure. It is low enough to be flagged through, as it is less than formal views of control. Yet if the ACCC doesn’t move for divestment, it is then likely to face creeping increases that take News over 10 per cent to give it greater blocking power in Fairfax. Murdoch has already hinted the holding may increase. Kerry Stokes’s 14.9 per cent of WA Newspapers raises different competition issues. It appears to be an initial step to ownership once the cross-media restrictions are formally abolished. While the ACCC has traditionally taken the view that newspapers and television are in different markets - meaning that in theory it had no competition issues on joint ownership - Stokes’s move is new territory for the regulator. Seven is the top-rating Perth network. The West Australian is the only daily newspaper. As well, Samuel has been foreshadowing a new slant on media markets involving control of content, not just advertising. Combined, Seven and the West Australian would exercise considerable sway on Perth content, and possibly advertising. Stokes’s move also sets a tricky precedent. Any ACCC tick means it is blessing similar strong television-newspaper content and advertising tie-ups in the three single-newspaper markets of Perth, Adelaide and Brisbane under the new media rules. That means creeping media concentration in major capitals. Samuel rightly points out that despite all the fanfare about media mergers - two-out-of-three ownership of TV, radio and newspapers is allowed but there is a five “voices” test in metro markets - it is still the section 50 guard on any likely substantial lessening of competition that will be the ultimate determinant. He has also joked that when it comes to a company taking a claimed “friendly” position in a rival, he is no believer in Santa Claus either. It’s time for him to smoke out those media Santas coming down the chimneys of their rivals. • Allan Fels is dean of the Australia and New Zealand School of Government and a former chairman of the Australian Competition and Consumer Commission. Fred Brenchley is a former editor of the Australian Financial Review, where this article first appeared. Photo: EPA/Everett Kennedy Brow